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    Published on: September 1, 2022

    CNBC reports that "Walmart-owned Sam’s Club said Wednesday it will raise its annual fees this fall, as the warehouse club’s membership hovers at a record high and inflation-pinched shoppers seek deals on bulk items.  Fees will increase to $50 from $45 for club members and to $110 from $100 for members of its higher-tier level, 'Plus,' which includes some additional perks."

    However, the story says, "Sam’s Club CEO Kath McLay said the company is 'mindful of the financial pressure on wallets right now.'  With that in mind, she said, Sam’s Club will pick up the tab this year by reimbursing the fee increase in Sam’s Cash that can be used at its stores.

    The increase takes effect on October 17, and "brings Sam’s closer in price to rival Costco, which charges $60 a year for its basic membership and $120 for its higher-tier 'Gold' membership."  There has been speculation in the media and among analysts that Costco was planning a fee increase, but to this point CEO Craig Jellinek has said that this is not "the right time."

    CNBC writes that "Chief Member and Marketing Officer Ciara Anfield said Sam’s Club decided to make the move because of investments in recent years, from elevating the quality of merchandise on its shelves to adding new and convenient ways to shop.

    "In recent years, it has added curbside pickup at stores, offered same-day home delivery, refreshed its Member’s Mark private brand and launched Scan & Go, a smartphone app that people can use to ring up items as they walk through aisle. It has started carrying brands such as Eddie Bauer, La Mer and Banana Republic. And even some of its bakery treats have gotten a gourmet spin, such as cinnamon rolls made with a French baking technique."

    Anfield tells CNBC, "We’ve made investments and we believe our proposition, our membership is now worth more."

    KC's View:

    The Sam's Cash idea is one way of reducing the sting … but I'm still not sure the timing is right.  Walmart can make all the arguments it wants about investments, but I'm not sure it will matter to stress-out shoppers.  The bottom line - Walmart had the opportunity to give its Sam's Club members a win, and didn't.  

    Published on: September 1, 2022

    The Wall Street Journal writes about how Starbucks is examining virtually every element of its operations - from employee relations to product formulation - as it looks to reclaim its preeminence in the zeitgeist.

    An excerpt:

    "Starbucks, the chain that made espresso ubiquitous in America, now faces daily crises in dispensing it. U.S. stores designed a decade ago struggle to meet today’s consumer demand. Cafes that once averaged 1,200 orders a day are now trying to make 1,500. Executives recently visited one East Coast cafe that averaged $1 million in annual sales a decade ago. Now, it is ringing up nearly $3 million in sales in the same 1,500-square-foot space.

    "Many U.S. locations need to be overhauled, said Katie Young, who as senior vice president of global growth and development is in charge of figuring out what new cafes should look like. Having so much demand is a privilege for Starbucks, but also a problem, she said.

    "Starbucks was hit hard by the pandemic. By last year, to-go orders had helped sales recover to prepandemic levels, but this year, rising costs have begun eating into profit margins, and the company has raised prices. In the quarter ended July 3, Starbucks reported that sales had risen 9% from the year-earlier period, but net income dropped 21%.

    "Executives also are grappling with a unionization push that began in its Buffalo, N.Y., market in August 2021. Workers have been pressing for better pay, staffing levels and hours. Turnover has shot up since the pandemic hit. One in four U.S. baristas are quitting their jobs within 90 days, according to internal figures, up from roughly one in 10 previously."

    KC's View:

    Starbucks can be seen as a poster child for the phenomenon of getting so complacent with one's business model that leadership does not really see the degree to which the business has evolved, eventually becoming so out of touch with reality that it begins to lose relevance.

    A retailer friend of mine yesterday pointed out that two of the most dangerous words for any retailer are these:  Apathy and Atrophy.  I think he's right, and that Starbucks suffered from both.  (We won't engage in an extended discussion of whether Howard Schultz, who has returned as CEO and is positioning himself as a savior of the company's legacy, share in the complicity for the crises that the company faces.)

    Having stores that are built to be third-places serving hot drinks, but actually are doing more take-out business and serving more cold drinks, is a perfect example of the kind of problems that every retailers has to work to avoid.

    Starbucks is right to put every policy and presumption on the table, challenging every part of the business and starting to separate core values from the stuff that just has dust on it.  "We've always done it that way" is a phrase that has to be banned from Starbucks' internal vocabulary.

    Published on: September 1, 2022

    The Wall Street Journal reports this morning that the Walt Disney Co. has been holding internal discussions about the possible creation of an Amazon Prime-style membership program that would cut across all its platforms and offerings - theme parks, streaming, stores, resorts - offering discounts and perks.

    According to the story, "Discussions at Disney are in the early stages. It couldn’t be learned how much the company would charge for membership and how long it would take to launch such a program.

    "By creating a membership program, Disney would be betting it could offer customers more value, prompting them to spend more on the company’s products and services, while providing Disney with a trove of information about their preferences."

    Internally, the Journal writes, the program is being referred to as "Disney Prime," though that is unlikely to be the name used if and when it is launched.

    “Technology is giving us new ways to customize and personalize the consumer experience so that we are delivering entertainment, experiences and products that are most relevant to each of our guests,” Kristina Schake, senior executive vice president and chief communications officer at Disney, said in a prepared statement. “A membership program is just one of the exciting ideas that is being explored.”

    KC's View:

    Amazon ought to ask for royalties from all the companies that have decided, with good reason, that they ought to have Prime-style programs - from the moment that Amazon launched it, Prime has been game-changing, creating an environment in which Amazon becomes the default first and often best choice for its best shoppers.  And, as we all know, Prime members spend a lot more on Amazon than non-Prime members, which means that best customers become even better customers.  It is its own kind of flywheel.

    The only problem I see with Disney doing this is that it is a company that already has raised many of its prices beyond what seems reasonable - I'm very glad that I don't have little kids yearning to visit Disneyland or Disney World, because I might have to take out a second mortgage.  Disney often seems like a company that ought to replace its slogan, "where dreams come true," ought to be replaced by, "we're back for more cash."  And so, in creating such a program - which in the Amazon iteration seems like the world's biggest and best loyalty program, in the words of Jeff Bezos, a program with so many benefits that it seems irresponsible not to join - Disney needs to figure out how it is going to make that case to its customers.

    One other thing - the most important phrase in the Journal story is this one:  "…while providing Disney with a trove of information about their preferences."

    Any customer-facing business that does not have actionable data about its shoppers, and then actually acts on it, is guilty of retail malpractice, in my view.

    Published on: September 1, 2022

    Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Financial Times reports on studies suggesting that Covid-19 is creating a swath of people around the world suffering from other serious maladies as a result - such as heart and brain disease - that will create stresses on health care systems and he global economy for years to come.

    The belief in some circles, the story says, is that "Covid generated a kind of epidemiological aftershock by leaving people susceptible to a huge range of other conditions, threatening global health systems already struggling with insufficient resources and aging populations."  In essence, Covid seems to be "increasing vulnerability to other serious illnesses."

    An excerpt from the FT story:

    "While more data will accumulate in the coming years, there is already evidence to back up his concerns.  A Financial Times analysis of data from the UK’s NHS, one of the world’s richest health data sets, showed significant rises in deaths from heart disease since the start of the pandemic in all but the very oldest age groups. In the 40-64 age group, heart attack deaths increased 15 per cent in 2021 compared with 2019.

    "In February, meanwhile, an analysis of more than 150,000 records from the national healthcare databases at the US Department of Veterans Affairs suggested that even some people who had not been seriously ill with Covid had an increased risk of cardiovascular problems for at least a year afterwards.

    "Researchers found that rates of many conditions, such as heart failure and stroke, were substantially higher in people who had recovered from Covid than in similar people who had not been infected. A separate analysis of VA data, published in March, suggested that in the 'post-acute phase' of the disease, people with Covid 'exhibit increased risk and burden of diabetes'."

    •  The Wall Street Journal this morning writes that "the Education Department’s first look at test-score trends since the pandemic began reveals the worst drop in math and reading scores in decades for students in fourth grade, a crucial indicator for educational and economic trajectory.

    "Scores released Thursday show unprecedented drops on the long-term trends tests that are part of the National Assessment of Educational Progress, known as the “Nation’s Report Card.” The tests are administered to U.S. students age 9.

    "The test scores reflect more than a pandemic problem, with experts saying it could take a generation for some scores to rebound. Some say current achievement levels could weigh on economic output in years to come."

    Published on: September 1, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  CNBC reports that Walmart is investing an undisclosed amount in Sustainable Beef, a company described as being "led by ranchers and beef producers," as it looks to streamline and bulk up its supply chain.

    Key to the deal is a new processing facility being built by the company in North Platte, Nebraska.   An excerpt from the story:

    "As part of the deal … the retailer will get the majority of beef produced at the facility, which is expected to open by late 2024, said Tyler Lehr, senior vice president of merchandising for deli services, meat and seafood for Walmart U.S. It will also get representation on the company’s board.

    "For the retailer, the deal means a larger, more consistent supply of beef, including better cuts. For shoppers, it will show up in the form of ground beef and steaks - including ribeye, sirloin and New York strip - in its meat department. Walmart will source Angus from the company, a type of beef that comes from a cattle breed often associated with more flavor because of its marbling."

    As grocery becomes an ever-growing contributor to Walmart's US sales - 60 percent at last calculation - it becomes more important for the retailer to have a steady, dependable supply … and, in this case, sustainable, which brings this move in line with other commitments it has made.

    •  TechCrunch reports that "Walmart’s last-mile delivery service business, Walmart GoLocal, has topped 1 million deliveries in its first year," noting that "GoLocal had been growing its support of local merchants’ delivery operations and was also now on track to reach 5,000 pickup locations by the end of the year."

    Walmart says that the one-year-old service "has been focused on helping our clients reach their customers through local delivery - whether they are a large enterprise looking to find efficiencies, improve coverage and lower costs for delivery or a small business seeking to build out and scale their delivery infrastructure for the first time. Just last week, we shared that we reached a notable milestone: more than one million deliveries completed through Walmart GoLocal.

    "Walmart GoLocal has enabled our clients to serve thousands of customers nationwide by offering custom delivery infrastructure capabilities tailored to each client’s specific needs. As we’ve grown, Walmart GoLocal has been able to drive density in the areas we serve, which enables us to offer competitive pricing due to delivery volume on routes. This translates into savings for our clients and their customers, coupled with a reliable and trusted partner in Walmart GoLocal."

    Published on: September 1, 2022

    •  In Florida, the Sun Sentinel reports that Kroger - which started a pure-play delivery business there as a way of grabbing market share in a market where it has no physical stores - has started getting aggressive in the southern part of the state.  This week it "mailed out fliers in South Florida offering $15 off customers’ first three delivery orders - a total of $45 in potential savings. The discount, also available from the company’s website, is intended to get customers acquainted with the service by offsetting the normal $9.95 per-order delivery fee."

    The story notes that "Kroger introduced its delivery service in Florida last year after opening a 375,000-square-foot customer fulfillment center in Groveland, about 30 miles west of Orlando. It also built spoke facilities in Jacksonville and Tampa for transfer of goods from semi trucks to refrigerated delivery trucks. Its third spoke facility was opened this summer in Opa-Locka to serve South Florida customers."

    Published on: September 1, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Wall Street Journal reports that bed Bath & Beyond has put into place $375 million in new financing that it hopes will give it some breathing room as it embraces a new strategy that will include closing some 150 stores, cutting its workforce by about 20 percent, cutting its capital investments by about 40 percent, and bringing back national brands that it had replaced with private label items.

    Good luck.  My question is whether Bed Bath & Beyond is simply a format for which there is no compelling need - it has, best I can tell, absolutely no differential advantage.  Before they get to spend any of that new money, management ought to be required to answer some simple questions:  What do you do that nobody else does?  What do you offer that is unique to you?  What is your plan for growing your differential advantages, making you even more distinct from the competition?

    •  From the Associated Press this morning, a story about a small robot called the TX SCARA that is "filling a needed role in Japan’s 'conbini,' as the ubiquitous tiny stores selling snacks, drinks and knick-knacks are called.

    "Most such stores are open 24-seven, filled with 3,000 kinds of products, but have relatively few workers. The beverage shelves in the back are farthest from the cash register, keeping workers running back and forth. And the beverage space is refrigerated, uncomfortably cold for people to stay there too many hours.

    "TX SCARA, which goes at an undisclosed price, can restock up to 1,000 bottles and cans a day. Its artificial intelligence, called 'GORDON,' knows when and where products need to be placed on shelves, according to Tokyo-based Telexistence, which created TX SCARA."

    Here;'s a video released by the company:

    •  In the UK, the BBC reports that supermarket chains John Lewis and Waitrose "are offering staff free food from October to January to help with the cost of living.  The meals, during work hours, are for permanent staff, known as partners, as well as temporary and agency workers … A spokesman for the John Lewis Partnership told the BBC someone working a four-hour shift could choose one meal - breakfast, lunch or dinner - depending on the time of day.

    "A partner working an eight-hour shift could choose two meals, he said. The food will be delivered in different ways depending on the workplace, he said.  Staff at larger stores, head offices and distribution centres will have their meals in canteens, while long distance lorry drivers would pre-order packed lunches, he said."

    The BBC notes that "soaring food costs have pushed UK inflation to 10.1% with prices continuing to rise at their fastest rate for more than 40 years."

    Published on: September 1, 2022

    Yesterday we took note of a MarketWatch report on a new JP Morgan survey saying that Walmart raised its food prices during the past quarter more than  any of its major competitors - 5.5 percent, compared to 4.6 percent at Target, 4.4 percent at Kroger, 2.9 percent at Albertsons, and 0.5 percent at Sprouts."

    MNB reader Dan Jones responded:

    Math geek moment:  Walmart original lower prices have a smaller denominator (lower starting price, so an identical price increase will result in a larger % increase at Walmart).  Here is a scenario for a $0.10 price increase at both Walmart and Retailer A.  Walmart $0.97 to $1.07 is a 10.3% price increase.  Retailer A $1.19 to $1.29 is an 8.4% increase.  Not sure this is a brag-able moment for anybody.

    Another MNB wrote:

    1. A quarterly increase percentage is not a fair comparison.  

    2. Whenever % are given, we need to be cautious before jumping to conclusions.

    3. Measuring one quarter may not be accurate because Walmart may have not raised prices as quickly as other retailers.  

    Comparing actual shelf prices is what really matters to consumers!

    From another MNB reader:

    Because of my long history (early adopter) of using their app for shopping, I’ve gone back through my purchase history and have witnessed staggering (+30%) price increases on center-store staples. Needless to say, I’ve visited Aldi more and more as of late.

    And, from still another reader, a different perspective:

    The one retailer here on the west coast that has done the best job of keeping their retail pricing in line versus any of their competitors is Winco. They really pay attention to what their customer perceives as a good price and value versus their main competition, Walmart, Kroger, Albertsons, Safeway, etc. I do not believe that Winco has been as greedy with their retail pricing as the aforementioned retailers.

    We also got an email reacting to Starbucks' new "Every Table Has A Story" ad campaign in the UK:

    While on vacation in Seattle earlier this month, we were delighted to visit and experience a Starbucks Reserve Roastery.  It is a wonderful place to spend time, relax, and socialize.  The atmosphere and social interaction inspired by the full store environment are real-time branding.  The experience is completely different than most of their neighborhood stores.  And, by the way, the coffee tastes great…nothing like the burnt tasting stuff they sell at their local stores.

    Published on: September 1, 2022

    As I noted in my FaceTime video this morning, I'm getting a head start on the Labor Day weekend by taking tomorrow off.  I'll be back on Tuesday, and hope you have a great weekend as we get ready to shift from summer to autumn.